Investment Liquidity Categories
Any investment that a fund reasonably expects can be convertible into cash in current market conditions in three business days or less.
Any investment that a fund reasonably expects can be convertible into cash in current market conditions in more than three calendar days but in seven calendar days or less.
Any investment that a fund reasonably expects can be sold or disposed of in current market conditions in seven calendar days or less ... but where the sale or disposition is reasonably expected to settle in more than seven calendar days.
Any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less.
SEC Rule Details
As a manager, you should base your assessments on the assumption an asset can be converted to cash without significantly changing the market value of the investment.
If affected by this rule, you will be required to review fund liquidity classifications at least monthly, then report findings on Form N-PORT. You will be required to note with the SEC if at any time an individual fund held “illiquid investments“ that are 15% or more of the total fund’s assets. If a fund is at, or above, the 15% threshold for more than seven calendar days, a defined program administrator is required to report to the Board within one business day. If less than seven days, the administrator must report to the Board at its next regularly scheduled meeting. Additionally, the administrator must provide to the company’s Board an explanation of the cause(s), the action taken, and how the fund intends to remedy the issue within a reasonable period of time.
For more information, read a memorandum from Goodwin Procter LLP
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